USD/JPY is expected to trade nervously between the latter half of the 157-yen range and 160 yen next week, with the US CPI and PPI releases, the tug-of-war involving AI stock declines, and expectations of a December BOJ rate hike in focus.
Next week, the market will await the release of the US October CPI and PPI for the same month. If persistent inflation is confirmed, expectations of further Federal Reserve rate hikes will strengthen, making dollar buying more likely. Conversely, if sharp declines in AI and semiconductor-related stocks continue against the backdrop of the Democratic Party securing majorities in both houses of Congress, yen buying is expected to prevail at times as investors seek safety. Market participants point out that concerns over BOJ intervention could intensify as the yen approaches 160 per dollar.
This week, the dollar often tested the upside as market movements following the midterm elections, US long-term interest rates and the employment report influenced trading. Nonfarm payrolls in the employment report released at the end of the week significantly exceeded market expectations, reviving expectations of an additional Federal Reserve rate hike before year-end. The dollar briefly reached the 158-yen range, but selling in AI-related stocks again restrained dollar-buying pressure, while the 200-day moving average was watched as downside support.
Next week's range is expected to be roughly 155.00–160.00 yen. Potential upside levels include 159.50 and 160.30 yen, while potential downside levels include 154.90 and 151.90 yen. Depending on the US CPI and PPI results, the flow of dollar buying or selling may become clearer, while the direction of the Japanese market is expected to be influenced by changes in expectations for BOJ rate hikes. Depending on the performance of AI-related stocks, the BOJ's monetary policy decisions could also be affected, potentially becoming a factor behind yen weakness and dollar strength. Conversely, when expectations spread that the BOJ will proceed cautiously with rate hikes, factors supporting yen strength may prevail.